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Thursday, July 10, 2008

Toyota Shifting Gears as demand for fuel efficient cars booms

Toyota Motor Corp. will build its Prius gasoline-electric hybrid in the U.S. as part of an overhaul of North American production driven by record-high gasoline prices.

The Prius, the world's best-selling hybrid, will be assembled in late 2010 at a plant under construction in Blue Springs, Mississippi, Toyota said in a statement today. That factory originally was to build the Highlander sport-utility vehicle.

The change mirrors U.S. consumers' rapid shift to fuel- efficient models and away from large pickups and SUVs as gasoline soars above $4 a gallon. It also eases production constraints on the Prius, now built mainly in Japan, that have left U.S. dealers with shortages of the car and an oversupply of its biggest trucks.

``They bet wrong on the truck market,'' said Jeff Liker, a University of Michigan engineering professor and author of ``The Toyota Way.'' ``They've been really good about not screwing up like that in the past.''

The company will consolidate production of Tundra large pickups at its San Antonio factory. The model currently is assembled in Texas and in Princeton, Indiana. The Princeton plant will suspend work on the Tundra and Sequoia SUV starting Aug. 8 until November. The Highlander will be shifted to Indiana.

American depositary receipts for the Toyota City, Japan- based automaker rose 50 cents to $91.98 at 10:54 a.m. in New York Stock Exchange composite trading. The ADRs have dropped 14 percent this year through yesterday.

First Decline Since 1995

Toyota's U.S. sales fell 6.8 percent in the first half, with trucks dropping 13 percent, pushing Japan's biggest automaker toward its first annual decline in U.S. sales since 1995. Toyota introduced a bigger, redesigned Tundra last year to increase its share of the U.S. large pickup market.

Bob Carter, general manager for U.S. Toyota brand sales, has said since January the company will sell about 170,000 Priuses this year, down from 181,221 in 2007, because of tighter supplies in the hybrid model's largest market. U.S. Prius sales last month plunged 34 percent to 11,765 from a year earlier and fell 3.2 percent in the first half.

Toyota had to make sure that there would be sustained demand for the Prius before moving production to the U.S., said Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan.

``Toyota has come to the realization that this is not just a blip on the radar screen, but is a long-term trend,'' he said.

Ford, GM, Chrysler

Fuel prices have prompted similar changes at U.S.-based automakers General Motors Corp., Ford Motor Co. and Chrysler LLC, all of which rely on trucks for a majority of their U.S. sales.

Ford has cut output at truck plants, including a nine-week shutdown of a Michigan SUV factory, while assigning overtime work at another Michigan plant that produces the Focus small car. Ford's F-Series pickup was passed by Toyota and Honda Motor Co. car models as the top-seller in the U.S. in both May and June.

GM said it will close four North American truck factories and is reviewing whether to divest its Hummer brand of SUVs. Chrysler plans to close its Fenton, Missouri, minivan plant. The company also will cut to one shift production of its Dodge Ram pickup at another plant in Fenton. Production also has been temporarily suspended for several weeks at SUV plants in Detroit and Toledo, Ohio.